nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒05‒24
eight papers chosen by
Erik Thomson
University of Manitoba

  1. Subjective Well-Being and Income: Is There Any Evidence of Satiation? By Betsey Stevenson; Justin Wolfers
  2. Economics 2.0: The Natural Step towards A Self-Regulating, Participatory Market Society By Dirk Helbing
  3. The Condorcet paradox revisited By Herings P.J.J.; Houba H
  4. Incomplete Information Models of Guilt Aversion in the Trust Game By Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni
  5. Appariement: des modèles de Lloyd Shapley à la conception de marchés d'Alvin Roth By Francoise Forges; Guillaume Haeringer; Vincent Iehlé
  6. Zur (Ir-) Relevanz der Kaufkrafttheorie By Scherf, Wolfgang
  7. The history of cyclical macroprudential policy in the United States By Douglas J. Elliott; Greg Feldberg; Andreas Lehnert
  8. Publish or Teach ? : Analysis of the Professor's Optimal Career Plan By Fouad El Ouardighi; Konstantin Kogan; Radu Vranceanu

  1. By: Betsey Stevenson; Justin Wolfers
    Abstract: Many scholars have argued that once “basic needs†have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of “basic needs†and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.
    Keywords: Subjective well-being, happiness, satiation, basic needs, Easterlin paradox
    JEL: D6 I3 N3 O1 O4
    Date: 2013–05
  2. By: Dirk Helbing
    Abstract: Despite all our great advances in science, technology and financial innovations, many societies today are struggling with a financial, economic and public spending crisis, over-regulation, and mass unemployment, as well as lack of sustainability and innovation. Can we still rely on conventional economic thinking or do we need a new approach? I argue that, as the complexity of socio-economic systems increases, networked decision-making and bottom-up self-regulation will be more and more important features. It will be explained why, besides the "homo economicus" with strictly self-regarding preferences, natural selection has also created a "homo socialis" with other-regarding preferences. While the "homo economicus" optimizes the own prospects in separation, the decisions of the "homo socialis" are self-determined, but interconnected, a fact that may be characterized by the term "networked minds". Notably, the "homo socialis" manages to earn higher payoffs than the "homo socialis". I show that the "homo economicus" and the "homo socialis" imply a different kind of dynamics and distinct aggregate outcomes. Therefore, next to the traditional economics for the "homo economicus" ("economics 1.0"), a complementary theory must be developed for the "homo socialis". This economic theory might be called "economics 2.0" or "socionomics". The names are justified, because the Web 2.0 is currently promoting a transition to a new market organization, which benefits from social media platforms and could be characterized as "participatory market society". To thrive, the "homo socialis" requires suitable institutional settings such a particular kinds of reputation systems, which will be sketched in this paper. I also propose a new kind of money, so-called "qualified money", which may overcome some of the problems of our current financial system.
    Date: 2013–05
  3. By: Herings P.J.J.; Houba H (GSBE)
    Abstract: We analyze the Condorcet paradox within a strategic bargaining model with majority voting, exogenous recognition probabilities, and no discounting. Stationary subgame perfect equilibria (SSPE) exist whenever the geometric mean of the players' risk coefficients, ratios of utility differences between alternatives, is at most one. SSPEs ensure agreement within finite expected time. For generic parameter values, SSPEs are unique and exclude Condorcet cycles. In an SSPE, at least two players propose their best alternative and at most one player proposes his middle alternative with positive probability. Players never reject best alternatives, may reject middle alternatives with positive probability, and reject worst alternatives. Recognition probabilities represent bargaining power and drive expected delay. Irrespective of utilities, no delay occurs for suitable distributions of bargaining power, whereas expected delay goes to infinity in the limit where one player holds all bargaining power. Contrary to the case with unanimous approval, a player benefits from an increase in his risk aversion.
    Keywords: Stochastic and Dynamic Games; Evolutionary Games; Repeated Games;
    Date: 2013
  4. By: Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni
    Abstract: In the theory of psychological games it is assumed that players' preferences on material consequences depend on endogenous beliefs. Most of the applications of this theoretical framework assume that the psychological utility functions representing such preferences are common knowledge. But this is often unrealistic. In particular, it cannot be true in experimental games where players are subjects drawn at random from a population. Therefore an incomplete-information methodology is called for. We take a first step in this direction, focusing on models of guilt aversion in the Trust Game. We consider two alternative modeling assumptions: (i) guilt aversion depends on the role played in the game, because only the "trustee" can feel guilt for letting the co-player down, (ii) guilt aversion is independent of the role played in the game. We show how the set of Bayesian equilibria changes as the upper bound on guilt sensitivity varies, and we compare this with the complete-information case. Our analysis illustrates the incomplete-information approach to psychological games and can help organize experimental results in the Trust Game. JEL classification: C72, C91, D03. Keywords: Psychological games, Trust Game, guilt, incomplete information.
    Date: 2013
  5. By: Francoise Forges (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine); Guillaume Haeringer (Departament d'Economia i d'Història Econòmica - Universitat Autónoma de Barcelona); Vincent Iehlé (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine)
    Abstract: Alvin Roth et Lloyd Shapley ont reçu en 2012 le prix de sciences économiques de la Banque Royale de Suède à la mémoire d'Alfred Nobel, pour leurs travaux sur l'organisation centralisée de certains marchés économiques, qui dépendent de l'appariement d'agents de deux types distincts (des élèves et des écoles, par exemple). Shapley est le co-auteur, avec David Gale, de l'article fondateur du domaine, qui propose un algorithme pour atteindre un appariement stable. Roth a dirigé la restructuration de la procédure d'affectation des internes dans les hôpitaux aux Etats Unis et la conception d'un marché lié à la transplantation de reins. Après avoir rendu compte de ces contributions, nous évoquons aussi le rôle déterminant de Shapley en théorie des jeux.
    Keywords: appariement, conception de marché, jeu coopératif, stabilité
    Date: 2013–04–18
  6. By: Scherf, Wolfgang
    Abstract: Nach der Kaufkrafttheorie belebt eine Erhöhung der (Nominal-) Löhne die Konsumnachfrage und führt somit in einer unterbeschäftigten Wirtschaft zu einem Anstieg von Produktion und Beschäftigung. Dahinter steht die kaldorianische Hypothese, dass eine Umverteilung des Einkommens zugunsten der Lohnempfänger die Nachfrage verstärkt, weil diese einen größeren Teil ihres Einkommens verausgaben als die Gewinnempfänger. Im Folgenden wird theoretisch begründet, warum Erhöhungen der Nominallöhne, die nicht zu höheren Reallöhnen führen, sondern in den Preisen weitergewälzt werden, keine positiven Produktions- und Beschäftigungseffekte nach sich ziehen. Die Analyse bedient sich nicht der geläufigen neoklassischen Argumentationsmuster, sondern verwendet ausschließlich Elemente der Verteilungstheorien von Kaldor (1955/56) und Kalecki (1938), die als keynesianische Verteilungstheorien eingestuft werden (Keynes-Gesellschaft, 2012). --
    Date: 2012
  7. By: Douglas J. Elliott; Greg Feldberg; Andreas Lehnert
    Abstract: Since the financial crisis of 2007-2009, policymakers have debated the need for a new toolkit of cyclical "macroprudential" policies to constrain the build-up of risks in financial markets, for example, by dampening credit-fueled asset bubbles. These discussions tend to ignore America's long and varied history with many of the instruments under consideration to smooth the credit cycle, presumably because of their sparse usage in the last three decades. We provide the first comprehensive survey and historic narrative of these efforts. The tools whose background and use we describe include underwriting standards, reserve requirements, deposit rate ceilings, credit growth limits, supervisory pressure, and other financial regulatory policy actions. The contemporary debates over these tools highlighted a variety of concerns, including "speculation," undesirable rates of inflation, and high levels of consumer spending, among others. Ongoing statistical work suggests that macroprudential tightening lowers consumer debt but macroprudential easing does not increase it.
    Date: 2013
  8. By: Fouad El Ouardighi (Operation management Department - ESSEC Business School); Konstantin Kogan (Faculty of Social Sciences - Bar-Ilan University); Radu Vranceanu (Economics Department - ESSEC Business School)
    Abstract: This paper analyzes how faculty members dynamically allocate their efforts between improving their research and teaching skills, taking into account the organizational structures and incentives implemented by academic institutions. The model builds on the assumption that organizational structures have an impact on the nature of spillover effects between teaching and research competencies. We analyze the dynamic equilibrium under unilateral and bilateral spillovers, using the no-spillover case as a benchmark. The bilateral spillover case is the most appealing as it achieves the highest overall performance; however, the nature of the equilibrium and the career paths can be quite different depending on the parameters of the problem such as the obsolescence of competencies or the strength of the spillover effect. This finding provides interesting insights on what could be the most productive configuration of a higher education institution.
    Keywords: Teaching; Research; Competency spillovers; Effort allocation; Faculty management
    Date: 2013–05

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